Interactive Investor

Muted reception to CMC Markets IPO

5th February 2016 12:30

Lee Wild from interactive investor

Determined to get its float away despite dodgy market conditions, spreadbetter CMC Markets has priced its IPO at the bottom end of the range. It's given founder and chief executive Peter Cruddas and major backer Goldman Sachs an exit strategy, but the share price is still trying to find its level late morning Friday.

It's second time lucky for Cruddas, who set up Currency Management Corporation in 1989 with just £10,000. He blamed volatile markets for ditching plans to list in 2006, just hours before he'd been due to price the offer.

Nine years later and the Eastender has just pocketed over £168 million from the share sale at 240p, a week after pricing the offer at 235-275p. That values the entire business at £691 million, far less than the £1 billion-plus mooted as recently as a few weeks ago.

The former Tory party treasurer still owns 62.5% of the company, worth £430 million, although he and his wife Fiona will not be able to sell any of them for at least 730 days. Then, they can sell half and the other half 1,095 days from IPO.

An extra £15 million was raised to cover IPO and staff bonuses. Goldman also offloaded more than half its 9.1% stake as part of the float, bagging nearly £27 million. Its remaining 4.99% holding is worth £34.5 million. However, the broker paid an astonishing £140 million for the stake in 2007 at the height of the market and just before the credit crunch. Ouch!

Of course, both will continue to receive dividend income. Cruddas bagged about £28 million from the 2015 final dividend and interim for 2015/16. The company will continue the policy of paying out 50% of underlying consolidated annual post-tax profit as dividends, starting with the final dividend for the year ending 31 March 2016.

In the year to March 2015, CMC made a pre-tax profit of £43.5 million on revenue of £143.6 million, up 35% and 18% respectively. Profit after tax rose to £34.7 million. CMC made £26.5 million pre-tax in the six months to 30 September 2015 and £20 million after tax on revenue of £78.9 million.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.